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KYRA PHILLIPS, CNN ANCHOR: President of the United States there, pushing once again his health-care reform bill. I will tell you in just a few minutes. RNC chairman, Michael Steele, will join us with his reaction.

The war against the Taliban meets the war on drugs with explosive results. Exclusive reports from a CNN corn embedded with U.S. Marines.

A House full of kids, a jail full of suspects, two dead parents. And a tangle of loose ends, and leads, and questions for police in the Florida Panhandle. Wait until you hear the latest.

And when it comes to health care, the squeaky wheel gets a whole lot of taxpayer dollars. A CNN special investigation: how Medicare spends your money. I hope you're sitting down.

Hello, everyone, I'm Kyra Phillips, live at CNN world headquarters in Atlanta. You're live in the CNN NEWSROOM.

(BEGIN VIDEOTAPE)

PHILLIPS (voice-over): They call it an unconventional war, and this is one reason why. These aren't artillery shells or IEDs being blown up in southern Afghanistan. They're poppy seeds, scales, and other equipment and chemicals used to make heroin. Heroin that's making its way to the United States and into the hands of U.S. drug dealers.

U.S. Marines are seizing ground from the Taliban in Helmand province, and it's squeezing its economic lifeline. Drugs flow out. Money flows in. People get high. Taliban fighters get weapons. And the war drags on.

For more now, five years now, the U.S. Drug Enforcement Administration has been a part of that war. And now it's part of a surge. Thomas Harrigan is the DEA's chief of operations and joins me live from headquarters in just a moment.

But, first, hold on. Let's take you to where all this is happening. CNN's Ivan Watson is with the Marines in Helmand province and saw the cash cow go up in flames.

(BEGIN VIDEOTAPE)

IVAN WATSON, CNN CORRESPONDENT (voice-over): Summer is the season for fighting in Afghanistan, and it's been a bloody summer. Four American soldiers killed on Monday by a deadly roadside bomb, which hit their vehicle in eastern Afghanistan, and one British soldier killed on Monday, as well, here in Helmand province, where we're located.

The NATO forces here, the U.S. forces, have hit record numbers of casualties for the month of July. They have broken records for this eight-year-long war, and this month is still far from over, as more troops continue to pour in from the U.S. military. They're trying to double the number of troops on the ground since last year as part of a major offensive to try to rout the Taliban.

Now, the Marines that I'm with right now from the 2nd Armored -- Light Armored Reconnaissance Battalion, rather, they took a step this week that they believe will try to limit the number of deadly roadside bombs the Taliban has access to.

They have been moving to a nearby market and gathering tons -- literal tons -- of poppy seeds for that cash crop, which grows opium and can be used to make heroin. It's a $3 billion industry here in Afghanistan, and the Taliban is believed to use these revenues to recruit fighters and to make weapons, as well.

And we saw in a ceremony today the Marines sent out a message, a spectacular message, with this explosion during a series of air strikes. Let's take a look at this.

(on camera) Those are 1,000-pound bombs dropped on more than 1,600 sacks of poppy seed. It's going to definitely put a dent into the poppy harvest here in southern Afghanistan, which can be described as the opium capital of the world.

Now, I talked to America's top coordinator for economic and development affairs here, Ambassador Tony Wayne, and I asked him whether or not the U.S. military is now getting into the business of poppy eradication. Here's what he had to say.

EARL ANTHONY WAYNE, ASSISTANT U.S. AMBASSADOR: What we realize is the nexus between poppy growing and drug trafficking and money for the insurgency. So, when there's opportunity to find stashes like this, that was discovered, part of the mission is to destroy it, to take and it destroy it.

WATSON (voice-over): Now, the big challenge here is if you take away the poppy business, the opium business, what kind of money- earning enterprise will be left for the poor farmers in this impoverished country?

(on camera) Ambassador Tony Wayne, he says that the U.S. government is funneling hundreds of millions of dollars to southern Afghanistan alone to help with agricultural aid. He says agricultural experts are coming in. He says there are work projects being set up and vouchers for farmers to buy fertilizer and seeds for legal crops to be put on the ground here.

But he says the big challenge is getting Afghan partners to work in conjunction with these international projects on the ground. That is going to be a big challenge, because any Afghan you talk to will say that the credibility of the central Afghan government is really in question right now.

The government often being accused of corruption and even being involved in this very heroin business, very same heroin business, that is booming in Afghanistan. And that government's credibility will be tested on August 20, in presidential elections.

PHILLIPS: Well, Afghanistan just hasn't cornered the world's heroin market; it owns it. The U.N.'s Office of Drugs and Crime says since 9/11, Afghans have been responsible for more than 90 percent of the heroin sold worldwide. Heroin that's getting into the hands of U.S. dealers and abusers.

It's fertile ground for the DEA, and that's what brings me to my guest in Arlington, Virginia.

Thomas Harrigan is assistant administrator and chief of operations. He's going to be sending a number of more agents over to Afghanistan.

And Tom, I just have to ask you, you know, learning about this, reading about this, seeing these reports coming out of Afghanistan through our Ivan Watson, should we be more concerned about terrorists breeding in Afghanistan and coming here and killing us, or the growth of heroin getting into the hands of drug dealers over here and killing us that way?

THOMAS HARRIGAN, DEA CHIEF OF OPERATIONS: Well, obviously, Kyra, both -- both of those are major concerns to us. What we're trying to do in the DEA, in close consultation with the Department of State, with Ambassador Holbrooke, with Ambassador Eichenberry, is send several additional agents to Afghanistan, not just to Kabul, but to forward deploy them throughout Afghanistan, down south in Helmand, which is ground zero, as you know for the opium business; out west in Horat; up north in Kunduz and in Jalalabad and Nangahar, as well.

So, our concern is to get the traffickers -- again not the farmers, but the drug traffickers, these high-value targets that process most of the heroin, over the world's -- 93 percent of the heroin that we see here throughout the world.

PHILLIPS: So, Tom, let me ask you, because you're not just sending a couple more agents over there. I mean, it's going to be far more than double of what has been there. What exactly can these DEA agents do that the military can't just by using force?

HARRIGAN: Well, it's a very balanced attack, Kyra. We're going over there. It is. It's the most prolific expansion in DEA history. We are sending our agents out to work in close coordination with the U.S. military and our NATO counterparts, but also, more importantly, with the counter-narcotics police of Afghanistan. We've worked with them over the last several years.

Again, DEA was in Afghanistan back in the '70s. We were there in the late '70s during the Russian invasion. We reopened our office in 2003, obviously because of the -- because of the potential movement of opium and heroin through Afghanistan, into eastern and western Europe, and eventually into the United States.

So, again, we work very, very closely with our military and with our counter-narcotics police of Afghanistan.

PHILLIPS: And, Tom, as you well know, corruption within the Afghanistan government is a tremendous problem. A lot of these drug dealers are very cozy with members of the government. That's got to be a challenge. How are your agents going to deal with that part of this war on drugs?

HARRIGAN: Well, that's -- that's a great question, Kyra. Again, it is a very delicate matter. We work very closely. We had vetted units. We have our vetted units throughout Afghanistan. We're never going to eliminate corruption, obviously, but we certainly will try to minimize it. And we will work with our very close counterparts in Afghanistan and, hopefully, overcome the corruption issue.

PHILLIPS: Final question, Tom: what's happened here? It seems that we've seen this tremendous increase, as we pointed out, since 9/11. What have you seen as the biggest failure here, and why more drugs are getting into the U.S.?

HARRIGAN: Well, again, right now, from -- from Afghanistan, we're not seeing a tremendous increase of heroin from southwest Asia. What we view it as, as a problem, it's a national security issue. As you've heard time and time again, we must not let Afghanistan fail.

We have to extend the rule of law throughout Afghanistan, and in doing such, will professionalize all the agencies in the Afghan government. But as far as DEA is concerned, especially the counter- narcotics police of Afghanistan, because, again, it is they that must remain in the country for years to come. And, again, we're trying to build a very professional, competent, law enforcement authority in the counter-narcotics police of Afghanistan.

PHILLIPS: Learning a little more every day, about the killings of Byrd and Melanie Billings, the couple who adopted several special- needs children. A revelation at every turn down this twisted Florida road. Like this little nugget: state documents now show that Byrd Billings once tried to copyright the kids' names. He'd send Florida a bill when their names appeared on a state letterhead.

We're also learning more about the suspects and about how the children are doing without their parents. Here's CNN's Susan Candiotti.

(BEGIN VIDEOTAPE)

SUSAN CANDIOTTI, CNN CORRESPONDENT: CNN has learned the suspects made a dry run at the Billings' home about a month before the murders, but the sheriff says it was not caught on surveillance cameras.

(voice-over) We are also finding out that the suspected mastermind, Leonard Gonzalez Jr., allegedly told investigators that he once received money from Mr. Billings before opening a martial-arts studio. And Gonzalez was apparently also at one time on Mr. Billings' payroll.

SHERIFF DAVID MORGAN, ESCAMBIA COUNTY, FLORIDA: Mr. Gonzalez worked, I think, for an automobile dealership. Again, we're verifying that information that he worked with one of the companies that Mr. Billings had -- and owned an interest in.

CANDIOTTI (on camera): The Billings family is doing everything it can to try to heal. Billings' daughter tells me that they've gotten a lot of help with the community, and putting in new windows, cleaning up the House, and putting a new security gate outside.

I also asked Billings' daughter about the funeral and about messages that the children attached to balloons that were sent up into the air.

ASHLEY MARKHAM, MELANIE BILLINGS' DAUGHTER: There were several "I love you, Mommys," "I love you, Daddys." I think one of them said that "You're the best mommy in the world." There's just -- you know, they -- they understand, and they're compassionate children. And they know that they -- their mommy's not here. And children -- all children need a mommy. And she was the best mommy.

CANDIOTTI: In her will, Mrs. Billings asks her daughter to take care of the children if anything happens to her. And Ashley Markham says, "I've told my brothers and sisters that's exactly what I am to you. I am your sister. You'll always only have one mother and father."

Susan Candiotti, CNN, Pensacola, Florida.

(END VIDEOTAPE)

PHILLIPS: A Harvard professor, one of this country's top black scholars, arrested, after someone catches him trying to get into his own House. Quite a case and quite a controversy in Cambridge. Some new developments, just in, in the last few hours.

(COMMERCIAL BREAK) PHILLIPS: President Obama wants Congress to pass health care reform, and fast. And if you didn't get the message, don't worry, because he'll keep repeating it. You may have heard him live just minutes ago at the White House in the Rose Garden.

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: So, I understand that some will try to delay action until the special interests can kill it, while others will simply focus on scoring political points. We've done that before. And we can choose to follow that playbook again, and then we'll never get over the goal line, and we'll face an even greater crisis in the years to come. That's one path we can travel.

Or, we can come together and insist that this time, it will be different. We can choose action over inaction. We can choose progress over the politics of the moment. We can build on the extraordinary common ground that's been forged, and we can do the hard work needed to finally pass the health insurance reform that the American people deserve.

(END VIDEO CLIP)

PHILLIPS: Competing plans are working their way through House and Senate committees. They aim to offer coverage to just about everybody while easing the financial strains on government and family alike.

The two main points of contention are costs. The White House says that reform shouldn't add to the deficit, and the so-called public option patterned on Medicare, which most Democrats support and Republicans oppose.

A leading voice in that Republican opposition, of course, RNC chairman Michael Steele. He joins me now live from our Washington studios.

Chairman, you never mince words. You heard the president's comments. Your major concerns right now?

MICHAEL STEELE, RNC CHAIRMAN: Well, my major concerns remain the same. I think tomorrow night the president has an opportunity to come straight to the American people and tell us exactly what's in this plan.

How much is it really going to cost us? Are you really going to cut $400 billion from Medicaid and Medicare programs? Are you really going to have to wind up increasing taxes by $600 billion on small businesses and families?

These are -- these are CBO's numbers. These are numbers that are coming from think tanks, people who are independently looking at what this plan is all about. And I think -- you know, I agree with the president when he says, you know, it's time to come together and do something different. But this isn't the different we want. And I don't...

PHILLIPS: What is the different that you want? Tell me what the difference is.

STEELE: Well, I mean, the different I want, I think we should start by the fact that we need to slow the train down, No. 1. Why this rush to get a health-care bill signed or at least passed before the August recess? No. 1.

No. 2, when you talk about bipartisanship, it's hard to be bipartisan when you're not even invited in the room. We are not even taking the suggestions and recommendations of Republicans in the House and Senate and making it a part of the bill. Oh, do you want to do the bill and then get us in the room to say, "Well, at least we had you there?" That's not -- that's not the approach I think that the American people want on what is ultimately a fundamental change to the way we do health care in this country, which is needed in terms of addressing the costs and insuring the uninsured. But the way the administration is going about it, to me, is not appropriate.

So, the delayed action is so that we can be smart about the action we have to take. And the political points, well, you know, right now the DNC is running around, you know, trying to gin up activity around what Senator Demint said yesterday. You know, is that -- is that how we're going to do the politics here?

PHILLIPS: But the more you delay, the more you delay, the more -- the more we're going into the hole. I mean, something has to be done. I think everybody agrees that it's important to come to some type of decision.

STEELE: Right, I agree.

PHILLIPS: Because we're already struggling enough in this economy, and health care is just costing us up the wazoo.

STEELE: Yes. Well, do you know what that "wazoo" is? Do you know how much the cost is, going up the wazoo? No, you don't.

PHILLIPS: You know what? Far too much to count. Elizabeth Cohen, our senior medical correspondent here, can you put a number on it, Elizabeth?

COHEN: We spend one sixth of our economy on health care. And Mr. Steele knows that. He talked about it at the National Press Club yesterday.

STEELE: Yes.

COHEN: That is a huge amount of money. And Mr. Steele agrees with everybody that that should not continue. It's way too much money.

But what I thought was interesting at your National Press Club feed, I've been reading it here. It was a really interesting speech. You didn't say what you would do to solve the problem. You've bashed Obama and Pelosi and those folks, but I didn't hear what you would do to solve the problem.

STEELE: I beg to differ. I beg to differ. I had 2 1/2 pages of recommendations of what we could do to begin to address the cost issue, which I laid out as the central reason for this crisis right now. It's cost driven. It's not access. It's not quality. It's cost.

And the reality of it is, there are four or five things I can drop right now from portability to tort reform to creating co-ops, to a host of other things that I've spelled out in 2 1/2 pages in that speech in bullets that tells you exactly what we should be doing and to begin to address the question of cost containment.

So I mean, to sit there that I didn't say what we would do, I reflected back to the American people what Republicans and Senate -- and -- Republicans in the House and Senate have been trying to get the Democrats to pay attention to for the last four or five months.

COHEN: When you were asked by someone in the audience, "How do you insure the millions of people who don't have insurance," you said, "I'm -- I'm not a policy person." But what would you...

STEELE: Right, that's not -- that's not my job. That's why we have elected officials who are now trying to deal with this issue which is, again, to my point. How do you begin to address that issue in two weeks' time?

It took us a year and a half to put the Medicare program into place. We want to fundamentally reorient one-sixth of our economy in two weeks. And that makes no logical point to me.

My job yesterday was to go out and to try to establish thematically where we think the administration is getting off the track and where we think that we can begin to put in place some necessary reforms, that I laid out in there -- tort reform, et cetera -- to deal with the cost containment.

And that's what the policymakers should go and take the time between now and the end of the year or the beginning of next year to put in place a solid health-care plan that includes insurance agencies, doctors, patients, lawyers and whoever touches this issue: pharmaceutical companies, for example, as well.

PHILLIPS: But whether government-run or private, I mean, no one's going to demand that you go one way or another. You're still going to have a choice.

STEELE: We don't -- maybe we do. I don't know. We haven't had that debate. I mean, you're talking about -- you're talking about the possibility of reorienting one-sixth of our economy with legislators who haven't even read the legislation. I mean, are they going to do to health care what they did with cap and trade? Are we going to get amendments at 4 a.m. in the morning and no one reads them? And then only after the Health and Human Services Department has to begin to implement this craziness, we're going to find out exactly what's in the bill?

This is not how you do health care. And it doesn't give comfort to the people of this country to know that this administration is trying to rush through what I think is a very risky experiment on their health care and the costs that they have to pay.

PHILLIPS: What about health care reform to senior citizens?

STEELE: Absolutely. Well, look. The Reg-D, you know, prescription drug benefit was put in place during the Bush administration. That was a reform. Some agree with it or didn't agree with it, but there came a consensus, a bipartisan effort, to reach that reform.

Certainly, as you go forward and you're looking at the weight and the cost of Medicaid and Medicare, not just to seniors, but to the poor in this country, that is something else that our legislators have to begin to deal with.

Is the administration going to have to make cuts in Medicaid and Medicare? If so, what are they? If so, how deep? And that's something, again, that has not been addressed as part of this overall effort to reform our health-care system.

There are a lot of seniors who run the risks in -- in a very short time if we go through with this thing -- and I had it happen -- someone said it this morning on another program, "Well, if my 85-year- old grand mother wants a hip replacement, why should we replace her hip?"

Well, who wants to have that conversation with an 85-year-old grandmother? Do you? Do you want to be the one to tell her you can't because you're too old? Do you want me to tell her that? Do you want the federal government to tell her that? That's a personal decision. And the government should not put itself in the position of dictating to anyone what their health outcomes are. We can address the cost issues, and there are ways to do that, but...

COHEN: It's interesting, when you state that, that the government's going to tell an 85-year-old grandmother, "Sorry, you can't have a hip replacement." Where is that in the legislation? I mean, where does it say the government is going to tell your grandmother whether or not she can get a hip replacement? I don't see it in either bill.

STEELE: Of course, you don't. Yes. It's a little something called implementation. Have you seen the flowchart that's come up on the bureaucracy that's going to be created? All the various levels of government agencies that are going to have a hand in this? How our independent group of people are going to sit back and make decisions about health-care coverage?

Of course, you're not going to spell that out in the legislation. But you can read and know where this thing is going.

And the reality of it is, it is -- it's part and parcel of what people are talking about, what people are concerned about. So, to this point, whether or not it's in the legislation, it is a concern that I've heard and a number of people have heard around the country that needs to get addressed.

And I don't think this administration can look the American people in the eye and tell them that three, four years down the road that the federal government, very much like it has with Amtrak, set up a monopoly in health care, and have the ultimate control of the outcomes of what you get, where you go, and how you receive that health-care service.

PHILLIPS: Want to point out, though, we're still talking about the fact that people will have a choice. They won't be told to go one way or the other. Final question, I'm curious...

STEELE: I don't know that. I don't know that. I haven't seen the final bill. I don't know that.

PHILLIPS: Question for you.

STEELE: And you don't either.

PHILLIPS: What kind of -- what kind of health care do you have?

STEELE: I have -- I have private -- I have health care through this -- through the RNC. But I was a small businessman and had to pay for this myself at one time, so I can tell you from firsthand experience what it's like to be able to go into this market and have to spend over $20,000 a year to provide health care for my family. So I understand the cost side of it. I also...

PHILLIPS: But are you happy with your health care?

STEELE: I'm happy with my health care, just like 85 percent of the American people.

PHILLIPS: So you're satisfied with your health care?

STEELE: But I am concerned about -- but I am concerned about the cost, just like I'm sure you are.

PHILLIPS: Well, I think we're all concerned about it.

STEELE: And that's the bottom line.

PHILLIPS: All right. Any final thoughts?

COHEN: I think you know what? Sometimes this comes down to the "haves" and the "have-nots." He just told us he's a "have." He's got great health care. What about the people who don't? And that's what health-care reform is about, as well as containing costs.

PHILLIPS: Chairman, final thought.

STEELE: ... million. But that's 47 million out of 310. All right? So don't paint this picture like, you know, America is you know -- 90 percent of our people don't have health care. That is not the case. We have a small segment of that community, 12 million of whom are illegal immigrants, 10 million of whom or so who are qualified for Medicare or Medicaid already but don't know it and have not gotten onto the program. A significant number of our young people.

So that 47 million number looks a little bit different when you get behind it and see who those people are and what their situation is.

PHILLIPS: Chairman, before I let you go, because I'm just curious. Elizabeth and I both were wondering. What type of health insurance do you have? Do you get that through the RNC?

STEELE: Yes. Through my employer.

PHILLIPS: What company is it?

STEELE: Blue Cross/Blue Shield, I believe.

PHILLIPS: All right. Chairman Michael Steele.

STEELE: Or maybe not. I'm not -- I think it's Blue Cross/Blue Shield.

PHILLIPS: Not sure?

STEELE: Yes.

PHILLIPS: You must -- you must not have gone to the doctor lately. You're in good shape. Chairman...

STEELE: Yes, I haven't had -- I haven't had to use the plan too much. Thank goodness. Although there are days in this job.

All right. My fact checker here, she keeps me honest on all the issues and all the numbers.

All right, well, this could have been the day that the Senate Judiciary Committee passed judgment on Sonia Sotomayor. Instead, as Senate rules allow, Republicans called for a one-week delay. With Democrats in the majority, nobody doubts the panel will recommend Sotomayor's confirmation to the Supreme Court of the United States, and the full Senate will confirm her.

A happy ending to a story that drew national outrage. Minority kids out of a swim club, now getting ready for a pretty fantastic trip. A celebrity, moved by their story, picking up the tab.

(COMMERCIAL BREAK)

PHILLIPS: Well, a big-name professor's arrest sparked big time controversy. The news hit Harvard Square and then the headlines. We'll have some new developments just in the last couple of hours. The Disorderly Conduct charge against Professor Henry Louis Gates, otherwise known as Skip Gates, is being dropped.

The noted black scholar had accused Cambridge cops of racial bias. Well, the whole mess sparked by a 911 call by someone who thought the professor was a burglar. It turned out, he was just trying to get into his home. Cops came. Words were exchanged and he was led away in cuffs. This morning, Professor Gates' friend and lawyer broke down his point of view on "AMERICAN MORNING."

(BEGIN VIDEO CLIP)

PROFESSOR CHARLES OGLETREE, GATES' ATTORNEY (via telephone): All it takes was a cool (ph) observation of where he worked. And the reality is that think about this, you walk into the house as a police officer and you see they things. You see his Harvard ID with his photograph, so you know who he is; you see the driver's license with his photograph; and then you see, as well, his address on the driver's license that matches the address where you are. Those are the facts.

(END VIDEO CLIP)

PHILLIPS: And, in fact, everyone's now on the same page.

Quoting now from a joint press release:

"The City of Cambridge, the Cambridge Police Department and Professor Gates acknowledge that the incident of July 16, 2009 was regrettable and unfortunate. All parties agree this is just a resolution to an unfortunate set of circumstances."

They were kicked out of a swim club's pool near Philadelphia. Now they're going to Disney World. A few weeks ago we first told you about the 65 kids from a mostly minority day care center who had their swimming privileges revoked. The swim club's director said that the children had changed the complexion and atmosphere of the club, and that made a movie star pretty mad. So he's footing the bill for all the kids to travel to Disney World.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: If you want to know the celebrity that you will be meeting that have paid for your trip to Disney World, the celebrity name is --

UNIDENTIFIED GROUP: Tyler Perry! UNIDENTIFIED MALE: How you all feeling about that?

UNIDENTIFIED GROUP: Good!

UNIDENTIFIED MALE: You're going to Disney World!

UNIDENTIFIED GROUP: Yes!

(END VIDEO CLIP)

PHILLIPS: Well, Tyler Perry, of course, is the star writer and producer of such hit movies as "Madea Goes to Jail," and his publicist says when Perry heard what happened to the kids, he immediately wanted to help.

Tyler Perry and Professor Gates are both featured in CNN's "Black in America 2." The countdown starts tomorrow night at 7:00, live from Time Square. Then at 8:00, President Obama's news conference, followed by the first night of CNN's two-night event, "Black in America 2."

Competitive bidding. It's supposed to save you money on medical expenses so why is taxpayer money paying four times more than something is worth? What our special investigations unit discovered will outrage you.

(COMMERCIAL BREAK)

PHILLIPS: It's called competitive bidding, and it's what Medicare wants to cut health care costs. But it's getting vigorous opposition from some in the industry and their supporters on Capitol Hill who want to keep a system that some call a taxpayer rip-off.

Drew griffin with CNN's Special Investigations Unit looked at what it costs to get a simple item for a patient. And you're going to be outraged on what he found out.

(BEGIN VIDEOTAPE)

DREW GRIFFIN, CNN SPECIAL INVESTIGATIONS UNIT CORRESPONDENT (voice-over): To Debbie Brown it's really easy to understand why Medicare is going bust. Since a back surgery gone bad six years ago, she's had plenty of time to think about it, to think about the wheelchair the government has been renting for her with Medicare dollars.

(on camera): For this squeaky chair?

DEBBIE BROWN, RENTS WHEELCHAIR: Yes. It's kind of embarrassing.

GRIFFIN (voice-over): So far, for this very wheelchair, taxpayers have spent more than $1,200 just to rent it.

(on camera): How much does this wheelchair cost if you just bought it?

BROWN: If I wanted this one, about $400.

GRIFFIN (voice-over): Could that possibly be true? Yes!

Here is the exact same wheelchair being sold on the internet for $440, free shipping. But, wait, it gets even better.

Brown's wheelchair is rented to her from a national health care products supplier named Apria Healthcare. It's one of the largest of thousands of Medicare suppliers. It's Apria that has already billed the government $1,200.

To check prices, we decided to buy our own chair. The company we contacted said Brown's model is no longer being made, but this one, made by the same company is even better.

GRIFFIN (on camera): These have been pretty sturdy and steady, right?

UNIDENTIFIED FEMALE: Yes, those are good chairs.

GRIFFIN (voice-over): The price? Just $349. The company selling it to us? Apria Healthcare. The same company charging Medicare $1,200.

(on camera): So, who would come up with a system where renting this wheelchair would cost four times the amount of money it would take to actually buy it?

Let me give you a hint.

JONATHAN BLUM, CENTER FOR MEDICARE MANAGEMENT: Well, Congress sets payment rules, and the statute's often very prescriptive to how CMS has to pay for health care services.

GRIFFIN (voice-over): Jonathan Blum is President Obama's pick to try to change for how Centers for Medicare and Medicaid Cervices, CMS, has been paying for this. Which he points out is very different from how the rest of the country shops.

Congress, it turns out, sets the rules for how much a wheelchair should be rented for, and Congress has determined that the wheelchair should be rented for a period of 13 months, instead of just buying them. And Congress has determined price is not as important as other considerations. Like small business contracts and availability.

(on camera): You can't imagine anybody who actually had to pay for this would go out and get the same price that the government is being handed?

BLUM: It's wrong. The good news is, we have new authority right now to use competitive bidding, which would give the program much more flexibility.

GRIFFIN (voice-over): That new authority is to actually have companies bid on the prices for things like wheelchairs.

UNIDENTIFIED MALE: Mr. Speaker, I would urge to us defeat this bill --

GRIFFIN: The problem is Congress has been very reluctant to allow competitive bidding. It's been delayed for years. Started last year, then stopped after just two weeks because of complaints from Congress. They will try again this fall, but Congress is complaining again.

In this letter signed by 84 members of Congress, saying the competitive bidding system is unfair. To find out exactly why members of Congress are against competitive bidding, we took our wheelchair to the halls of Congress, to the top Republican and Democrat, who signed that letter.

Betty Sutton is the Democrat.

(on camera): What better way to contain costs than just have a competitive marketplace?

REP. BETTY SUTTON (D), OHIO: Well, you know what, I'm a big believer in competitive bidding, so at the outset, I absolutely concur. But this program, as it has unfolded, as it's been developed, it really is a competitive bidding process that isn't competitive at all.

GRIFFIN (voice-over): Marcia Blackburn is the Republican.

(on camera): On the free market, this $349 --

REP. MARSHA BLACKBURN (R), TENNESSEE: That's right.

GRIFFIN: -- wheelchair's pretty cheap. When the government is paying for it, it so far costs four times as much money.

That is right. And anytime you have a bureaucracy that is going to make those decisions and is going to decide what that price is going to be, look what it ends up costing. And as we talk about health care reform, that is one of our points.

GRIFFIN (voice-over): Both say they support competition, just not the rules that government has set up.

What's this really about? The American Association for Home Care represents businesses who have been billing the government for things like wheelchair rentals.

In a statement, the Association said the bid program would "sacrifice care for seniors and people with disabilities" as it "reduces patient access to and choice for medical equipment." And the association claims "competitive bidding will actually increase Medicare costs because it will lead to longer, more expensive hospital stays."

(on camera): How does Apria account for the disparity in pricing of these two wheelchairs? The company says its own employee made an honest mistake and should have charged CNN $949 for the Tracer SX-5. $949 for a wheelchair whose manufacturer suggests a list price of $655? And a wheelchair we again found online even cheaper than we first bought it for $289 and $249, free shipping.

Apria says it charges more for its wheelchair because of extensive government paperwork and its full-service, 24 hours a day, including free delivery. John Rother with the retired advocacy group AARP, says, industry is trying to protect profits for a $349 wheelchair costs a mere $1,200.

JOHN ROTHER, AARP: It's an outrage. It's a ripping-off of the taxpayer. It doesn't make any sense.

GRIFFIN (voice-over): Debbie Brown, her four year old wheelchair now needs replacing. She's reluctantly applied through her doctor for a new one.

Drew Griffin, CNN, Sacramento, California.

(END VIDEOTAPE)

PHILLIPS: An SUV on fire, a woman and her two young children trapped. Rescue would have to be quick with no mistakes.

(COMMERCIAL BREAK)

Sorry seems to be the hardest word a lot of times when someone screwed up, especially if it could leave them legally liable. Say a doctor's medical mistake. A story that we're working on for the next hour of NEWSROOM, a nice change of pace in Michigan where the U of M health system found sorry is a lot cheaper than a suit.

Issue number one, times three. The end is near says Fed chief Ben Bernanke, the end of the recession, that is. But, don't expect a booming recovery. Bernanke's warning Congress and I quote, "Unemployment will stay high for quite some time."

SIG Tarp wants answers. That's the special inspector general overseeing bank bailouts. And he wants the Treasury Department to get a detailed accounting of what those banks are doing with your dollars.

And the Golden State is hurting these days, but California lawmakers and Governor Schwarzenegger managed to make up a $26 billion short fall. For three weeks now, the state has been issuing I.O.U.'s to contractors and vendors.

Science takes us back in time to the moments before Steve McNair's death. What it's telling us more than two weeks after his sudden and violent ending.

(COMMERCIAL BREAK)

PHILLIPS: And a footnote to the Steve McNair case. Test results show the retired NFL quarterback was drunk, at least in a legal sense, where his mistress shot and killed him more than two weeks ago. Blood alcohol level, more than twice the legal limit for driving in Tennessee. The mistress killed herself. Toxicology reports show that she had a trace of marijuana in her system. Two down, one to go. The second of three convicts who busted out of an Indiana prison earlier this month back in custody. The rapist and the law were reunited at his parents home in Rockport. Now the focus is Mark Booer. He's a convicted killer and is still out there somewhere. The other escapee, another killer, was caught the day after the escape.

And we're pushing forward on health care. It is a daily mission for President Obama now. You may have heard him live at the top of the hour telling Congress, and I quote, "The status quo is unacceptable and this time it will be different."

(BEGIN VIDEO CLIP)

BARACK OBAMA, PRESIDENT OF THE UNITED STATES: Common ground, but make no mistake. We are closer than ever before to the reform that the American people need and we're going to get the job done. I have urged Congress to act and the health care reform bill is making their way through the respective committees in the House and the Senate to reflect a hard earned consensus about how to move forward. So --

(END VIDEO CLIP)

Now Republicans are still pushing back, warning Democrats to slow down, spend less and change course. Last hour my colleague Elizabeth Cohen and I interviewed RNC Chairman Michael Steele. You'll hear from him in a minute. Republicans point to a Congressional Budget Office report that Democratic reform plans would add to the nation's debt and still not cover everybody. Supporters of those plans say the CBO didn't take account of potential savings.

PHILLIPS: Malpractice insurance, jury awards and fear of malpractice lawsuits have helped make U.S. health care the costliest in the world. But the University of Michigan health system has a prescription for savings -- I'm sorry. Turns out admitting mistakes, apologizing and offering compensation really does pay off.

Rick Boothman is the university's Chief Risk Officer and former malpractice defense attorney. He joins me now live from Ann Arbor.

So, I'm curious, how exactly did you convince the administration to do this?

RICHAED BOOTHMAN, CHIEF RISK OFFICER, UNIVERSITY OF MICHIGAN: Actually I guess I'm somewhat of an anomaly here. I never asked permission. We just started to do it, realized some success, publicized that success and because it made all the sense in the world, it just got the ball rolling.

PHILLIPS: Well, how did it come up? And seriously, how did that negotiation process to get the university to sign on to this?

BOOTHMAN: Well, to be honest, it wasn't that difficult because as one of the malpractice lawyers for the university, I knew that the University of Michigan had an inherent ethics about it anyway. I certainly didn't bring ethics to the University of Michigan. So doing the right thing was pretty natural. They -- I think our medical staff had to be convinced that it was safe to do. And once you got over that fear, it really wasn't a hard sell at all.

PHILLIPS: So, Richard, how do you go about this?

Does the doctor discover that he or she did something wrong, go to the superiors and say, OK, we've got to bring in the patient, this is what happened, and we've got to all sit down and try and admit our mistake and see if they'll take compensation and not sue us?

BOOTHMAN: Well, it's a little more complicated than that. But, the first thing you should realize is that we have realized such success with our early intervention program here that the institution is now sold on the value of early reporting.

Just to give you an example, our incident reports -- when things go wrong, our incident reports have risen from roughly 2,000, about five years ago, to 18,000 last year. That doesn't mean we're less safe. It means that people now believe in the importance and the value of telling the Department of Risk Management when something has gone wrong.

One of the problems, one of the challenges in our area is that just because things go wrong, doesn't necessarily mean that somebody did something wrong. Unlike automobile accidents or product liability injuries, you can do everything right in medical -- the delivery of medical care and still not get the results that you want.

So, what happens, in answer to your question in, our staff is sold on the importance of early reporting. We get phone calls from operating rooms, we get phone calls almost immediately after there's been an unanticipated outcome of some sort. And we dispatch one of our risk managers, who are on call 24/7, right to the scene to start an investigation, serve as a buffer to the patient to provide information. We just commit to the patient that we're going to give them an honest and transparent view of what happened once we get the answers.

PHILLIPS: OK. Now, I can understand because you've implemented this new policy, you admit the mistake, you say you're of sorry, you work out a compensation deal, if indeed that's what it turns into.

I understand that malpractice claims are down. But what about the number of mistakes? Because that's one way you fix those mistakes. You sue, and internal records become available, you can see who needs to be held accountable, and then hopefully the problem is fixed.

So, I guess the main crux of my question here is, how do you know the problems are definitely being taken care of when really no one is held accountable?

BOOTHMAN: Well, first I would disagree with the premise that no one is held accountable. In fact, we are very accountable for what happens. PHILLIPS: I guess I should say legally. You're absolutely right. Legally, you know, someone is not sued. And so how do you make sure the problem is fixed?

BOOTHMAN: Oh, because we -- in all honesty, the mood of the place has changed dramatically. Our staff is now so focused on patient safety, as opposed to worrying about claims, that we have got a very robust patient safety apparatus.

Our chief of staff is Skip Campbell (ph), a transplant surgeon who is completely committed to all of this and he's very courageous about it. So our patient safety culture is on the rise.

We're able to track complications, we're able to track things like infections and mishaps. We issue a daily, a weekly, a biweekly, a monthly report. All of our executives are kept almost regularly informed of certain safety parameters. So there's lots of checks and balances here to keep our eye on that really important prize, and that's patient safety.

PHILLIPS: Well, it's interesting to see how many other universities will do this as well. We'll follow up.